2017 (10) TMI 1040 - AT - Central Excise

CENVAT credit - penalty - wrongful availment of CENVAT credit - non-payment of service tax on immovable property - scope of SCN - Held that - Only demand raised in the show cause notice on account of denial of Cenvat credit of ₹ 4,55,181/-. In fact, appellant has availed Cenvat credit of ₹ 4,20,283/-, therefore, the show cause notice is defective asking the appellant to reverse the Cenvat credit to the tune of ₹ 4,55,181/- - there is no demand of service tax has been raised in the show cause notice, therefore, service tax cannot be demanded from the appellant. As there is no demand of service tax, therefore, no penalty is imposable on the appellant. For the amount of ₹ 4,20,283/- the sole reason for denial of Cenvat credit is that the appellant is not entitled to avail Cenvat credit on the photocopy of the invoices issued by the service provider - As the original invoices are in the record of the head office. In that circumstances, the Cenvat credit cannot be denied to the appellant as it is not disputed that the appellant has not received the services and not paid the service tax - credit allowed. Appeal allowed.

Summary

Issues:
Appeal against denial of Cenvat credit and imposition of penalty.

Analysis:
The appellant appealed against an order denying Cenvat credit of ?4,55,181 and imposing a penalty. During an audit, it was discovered that the appellant had wrongly claimed Cenvat credit of ?4,20,283 and had not paid service tax for works contract services and renting of immovable property. The show cause notice was issued for denial of Cenvat credit, demanding interest, and imposing a penalty. The Adjudicating Authority confirmed the denial of Cenvat credit but dropped the interest demand. The penalty was upheld. The appellant then approached the learned Commissioner (Appeals) who affirmed the Adjudicating Authority's decision. The appellant contended that they were entitled to the Cenvat credit as the head office had transferred proportionate credit to them via photocopies of original invoices. They argued that they had a genuine belief and made an unintentional mistake in not paying the service tax. The appellant's position was that they had received the services and paid the service tax, hence should be allowed the credit. The appellant also highlighted a defect in the show cause notice, pointing out that no demand was made for non-payment of service tax. The Tribunal found merit in the appellant's arguments and set aside the impugned order. It was concluded that the denial of Cenvat credit and the penalty were not justified. As no demand for service tax was raised, no penalty was deemed applicable. The appeal was allowed with any necessary consequential relief.